Financial markets maintained their subdued tone, as investors marked time ahead of the re-opening of US stock exchanges on Monday.

The Tokyo market opened marginally higher and crept up during the morning, with the Nikkei 225 share index ending Friday's morning session up almost 1% at 9,704.18 points.

European stock markets, Thursday close

Frankfurt, Dax +1.3%

London, FTSE 100+1.3%

Paris, Cac 40 -0.01%

Japanese investors were cheered by earlier stability on the European markets, and by hopes that the Bank of Japan (BoJ) might opt further to loosen its monetary policy.

BoJ governor Masaru Hayami is due to address the Japanese parliament later on Friday, and a meeting on monetary policy is scheduled for next week.

For the third day running, the market opened half an hour later than usual, and price limits were at half their normal levels.

European calm

A few hours earlier, European shares had ended the day little changed, although some of the worst hit stocks in recent days, notably insurers and travel firms, recovered some ground.

The Frankfurt market observed a minute's silence

The Toronto stock exchange, the only North American market to operate as normal on Thursday, also saw a slight recovery from the gloomy mood of earlier in the week.

Most exchanges observed a minute's silence, and activity throughout the day was overshadowed by events in the US.

Other markets quiet

The dollar showed only small movement as sense of calm and certainty continued to re-establish itself among markets following the turmoil prompted by Tuesday's terrorist attacks on the US.

Trading in US bonds was subdued

Trading resumed in US bonds after a two-day halt, and prices surged over hopes that American interest rates will be cut to help shield the economy from the after-effects of the attacks.

Many investment banks are predicting that the US Federal Reserve will cut interest rates by 0.5 percentage points, possibly as early as Monday.

The US Treasury confirmed that it would launch a sale of government bonds on Monday, in the hope of raising $4.6bn in short-term funding.

Stabilising markets

Traders credited the renewed stability in markets largely on the pledges by governments, central banks and economic authorities around the world to seek ways to help stabilise the world financial system.

Authorities have promised, following the attacks, to boost the global economy by making it easy and cheap for companies to borrow money to spend and invest.

While the European Central Bank (ECB) declined to take the opportunity to cut interest rates on Thursday following a scheduled rates meeting, the bank's steady-as-she-goes policy had been widely forecast.

ECB president Wim Duisenberg had warned against hasty rate cuts, saying they could give the impression of panic.